Despite representing only about 10 percent of total U.S. health spending, outpatient drugs are one of the main targets of cost-containment efforts by health insurers. While the public may benefit from medical innovation, it is increasingly difficult to find people willing to pay for it, which has long-run implications for incentives to invest in risky biopharmaceutical innovation.



Objectives:

Outline how much biotech innovation costs, and how different biotech and pharmaceutical R&D costs are.
Describe how innovation responds to availability of capital.

Discuss how current and prospective international price controls affect the flow of new drugs, consumer well-being and firm value.